1) Production Possibilities for Picnicland
What is the opportunity cost to Picnicland of increasing the production of hotdogs from
450 to 900?
a.150 burgers
b.225 burgers
c.300 burgers
d.450 burgers
2) Table 22-10
The town of Franklin is facing a severe budget shortage. The town administrator has
proposed four options to balance the budget: increase property taxes (taxes), cut the
school arts budget (arts), turn off half of the streetlights in the town (streetlights),
reduce police patrols (police). Exactly one of the four choices will prevail, and the
choice will be made by way of pairwise voting, with the majority determining the
outcome on each vote. The preferences of the voters are summarized in the table below.
Voter Type
Refer to Table 22-10. If the town administrator asks voters to choose first between
increasing taxes and turning off half of the streetlights, and then between the winner of
the first vote and reducing police patrols, and then between the winner of the second
vote and cutting the school arts budget, which choice will win the final vote?
a.arts
b.police
c.streetlights
d.taxes
3) George and Susan work at the same brewery. George works in advertising. Susan
works as a forewoman in the bottling plant. George is paid more than Susan.
a.Because the male worker earns a higher salary than the female worker, the employer
must be discriminating against women.
b.If George has better performance reviews than Susan, the company might be
rewarding George for his high productivity.
c.If forepersons at bottling plants typically earn more than employees in the advertising
department, then the brewery must be discriminating against women.
d.George might be earning more because he works the day shift while Susan works the
night shift.
4)
The section of the demand curve from A to B represents the
a.elastic section of the demand curve.
b.inelastic section of the demand curve.
c.unit elastic section of the demand curve.
d.perfectly elastic section of the demand curve.
5)
Reaching an efficient bargain is difficult when the
a.externality is large.
b.number of interested parties is large.
c.externality is negative.
d.government becomes involved.
6) Game theory is necessary to understand which kinds of markets?
(i)perfectly competitive
(ii)monopolistically competitive
(iii)oligopoly
(iv)duopoly
(v)monopoly
a.(i) and (ii) only
b.(iii), (iv), and (v) only
c.(iii) and (iv) only
d.(i), (ii), (iii), (iv), and (v)
7) An increase in the size of a tax is most likely to increase tax revenue in a market with
a.elastic demand and elastic supply.
b.elastic demand and inelastic supply.
c.inelastic demand and elastic supply.
d.inelastic demand and inelastic supply.
8)
The opportunity cost of moving from point J to point L is
a.2 donuts.
b.2 donuts and 2 cups of coffee.
c.2 cups of coffee.
d.6 cups of coffee.
9) Which of the following is not an example of a barrier to entry?
a.John owns the only parcel of lakeside property with a beach that is safe for
swimming. He charges admission to neighbors who want to use the beach.
b.Jackie owns the copyright to a popular song. She receives royalties every time a radio
station plays her song.
c.John Jr. owns the best seafood restaurant in a popular resort area. He charges high
prices because the quality of the food is so good.
d.Caroline owns the patent for a new running shoe. She receives payments from the
company who manufactures the shoes.
10) Changes in supply and demand in the labor market will cause changes in wages.
a.True
b.False
11) Figure 16-2. The figure is drawn for a monopolistically competitive firm.
Suppose you were to add the ATC curve to the diagram to show the firm in a situation
of long-run equilibrium. You would draw the ATC curve
a.with its minimum at the point (Q = 24, P = $36).
b.with its minimum at the point (Q = 24, P = $24).
c.tangent to the demand curve at the point (Q = 24, P = $36).
d.tangent to the demand curve at the point (Q = 32, P = $32).
12) Defenders of advertising
a.concede that advertising increases firms’ market power.
b.concede that advertising makes entry by new firms more difficult.
c.contend that firms use advertising to provide useful information to consumers.
d.All of the above are correct.
13) The story of the prisoners’ dilemma shows why
a.predatory pricing is clearly not in society’s best interest.
b.economists are unanimous in condemning resale price maintenance, since it
inevitably reduces competition.
c.oligopolies can fail to act independently, even when independent decision-making is
in their best interest.
d.oligopolies can fail to cooperate, even when cooperation is in their best interest.
14) Vertical equity refers to a tax system in which individuals with higher incomes pay
more in taxes than individuals with lower incomes.
a.True
b.False
15) In which of the following market structures can firms earn economic profits in the
long run?
a.perfect competition
b.monopolistic competition
c.monopoly
d.Both b and c are correct.
16) Which of the following is the best explanation for why President Harry Truman
once said that he wanted to find a one-armed economist?
a.President Truman received input from so many economists that he only wanted one
view from each.
b.President Truman thought economists should analyze policies but not make or enforce
them.
c.Economists understand that most policy decisions involve trade-offs so they are likely
to present multiple views of policies.
d.A one-armed economist would conduct only positive analysis and no normative
analysis.
17) Figure 8-9
The vertical distance between points A and C represents a tax in the market.
The imposition of the tax causes the price received by sellers to
a.increase from $600 to $800.
b.decrease from $800 to $300.
c.decrease from $600 to $300.
d.remain unchanged at $600.
18) Scenario 16-6
Ike’s Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The
market for ice cream parlors is monopolistically competitive.
As a result of the new Ike’s Ice Cream parlor, consumers living in and visiting Mayville
are likely to experience a
a.business-stealing externality, which harms producers.
b.business-stealing externality, which benefits producers.
c.product-variety externality, which harms consumers.
d.product-variety externality, which benefits consumers.
19) Unions are often able to sustain wages above the equilibrium wage because they
can threaten to
20) Scenario 22-5
A wireless telephone service provider offers three service plans to its consumers.
Refer to Scenario 22-5. By offering consumers these choices and allowing them to
select the plan that best meets their needs, the wireless service provider is engaging in
21) The demand for energy drinks is more elastic than the demand for milk. Would a
tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.
22) Assume the role of a critic of advertising. Describe the characteristics of advertising
that reduce the effectiveness of markets and decrease the social welfare of society.
23) Figure 8-26
Suppose the government increases the size of the tax on this good from $3 per unit to
$6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the
same?
24) What is the relationship between the marginal product of labor and the value of the
marginal product of labor?
25) Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40, how many units will be bought and sold after the tax is imposed?
26) One way of expressing the tradeoff between income equality and efficiency is to
say the more equally the pie is divided, the .
27) Figure 21-31
The figure shows two indifference curves and two budget constraints for a consumer
named Kevin.
Refer to Figure 21-31. If point A is Kevin’s optimum, then at that optimum, what is his
opportunity cost of a shirt in terms of sweaters?